Reference United Kingdom telegram of 2nd August (Canberra 169).
 We are prepared to have an exchange of views by telegram in advance of the Canberra meeting. This could be supplemented by discussion at Canberra in the event of conflicting view points, or, if it were agreed that the United Kingdom should make their proposed approach to the United States, could be in the light of the United States reactions. We shall not however propose this to the United Kingdom Government until we have your views upon such a procedure.
2. The approach to the United States proposed in United Kingdom telegram of 17th June (Canberra 122) implies the abandonment of the agreement made at the British Commonwealth meeting in April 1946 that we should work towards a Regional Security arrangement for the South and South West Pacific area under Article 52 of the Charter, that we should ask the United States to participate in such an arrangement and that we should settle the question of bases as part of the general system. All that remains is the suggestion that the United States should declare that the security of the area is a matter of concern to her. This is disappointing but more than a year has passed without apparently any sign of interest by the United States in a Regional Agreement for the South and South West Pacific; indeed the goal set in April 1946 seems further from attainment than ever and in view of the decline of United States interest in the area (as reflected for instance in the virtual dropping of their claim to the twenty-odd islands) we doubt whether they would ever be willing to give a declaration in the sense proposed by the United Kingdom.
3. We are still anxious, as we were in April 1946, that the United States should be involved in the defence of our region and that she should keep up certain bases which would be available to us in peace or in war though we are still equally unwilling that the price of this should be the cession of British Commonwealth Territory or the abandonment of strategic or civil aviation interests or in the case of Christmas Island neglect of the future welfare of the natives of the Gilbert and Ellice area. We note with regret that the United States is not thinking in terms of co- operation with the British Commonwealth in the Pacific; otherwise it seems to us she would not ask for the outright cession of three important islands after it had been made clear that we were completely willing to discuss co-operative arrangements.
4. In these circumstances we think that the United Kingdom approach which inter alia rejects outright cession but offers full co-operation and reciprocity is sound and for our part we are disposed to agree that it should be tried. More than this we think we are unlikely to get. In fact we have no confidence that the United States will either make the declaration or give the staging rights in the Philippines; though this is no reason for not making the request. If the United Kingdom were to make the approach she suggests and then test United States reactions before the Canberra meeting, we might be in a better position to discuss the matter realistically on that occasion.